Introduction to Business & Marketing Supply & Demand Introduction to Business & Marketing

Review! What type of mixed economy do we have in the United States? Capitalism Capitalism is based on the principles of _____. Free Enterprise Free enterprise is based on the concept of _____. Supply & Demand

Task 40 Explain supply, Law of Supply, demand, Law of Demand, and economic equilibrium.

Supply & Demand SUPPLY DEMAND the amount of goods that producers are willing to make & sell the consumer willingness and ability to buy products

Law of Supply When prices are high, supply will rise. The arrows go in the same direction for supply! P3 P2 P1 Q1 Q2 Q3

Think About It… What factors influence the supply of a product or service?

Factors that Affect Supply Costs (Resources) Competition Natural Disasters Economic Changes Government Intervention Technology Cost of Production – RESOURCES Number of Producers – BUSINESS COMPETITION Natural Disasters – Eggo waffles plant Economic Changes – recession (hybrids) vs. prosperity (SUVs) Government Intervention – interest rates; war time Technology – more production when it is easier/faster to make

Name something that is currently in high supply but low demand.

Law of Demand When prices fall, demand will rise. The arrows go in different directions for demand! P3 P2 The arrows move in different directions! P1 Q1 Q2 Q3

Law of Demand When shirts go on sale, you might buy three instead of one. The quantity that you demand increases because the price has fallen. The opposite is true if the price increases. The arrows move in different directions!

Think About It… What factors influence the demand for a product or service?

Factors that Affect Demand Consumer trends/fads Consumer expectations (hype, pre-orders) Available substitutes (juice instead of soda) Quality of promotion (marketing!) Economic changes (recession vs. prosperity) Natural disasters (Harvey, Irma, Maria) Government intervention ($8k incentives to buy homes) Consumer Preferences – trends, fads Consumer Expectations – hype; pre-ordering Harry Potter books or video games Substitutes – other products that can replace another; buying juice instead of soda Promotion – sales, commercials, customer awareness Economic Changes – recession (Honda) vs. prosperity (Hummer) Natural Disasters Government Intervention – housing market example ($8,000 incentive to buy homes)

Name something that is currently in Low supply but high demand.

Graphing Practice

Task 41 Describe the impact of supply & demand on a free enterprise system.

The Impact of Supply & Demand Surplus supply > demand Shortage supply < demand Equilibrium supply and demand are equal Demand Supply P3 P2 Equilibrium is the goal because it is the point of maximum profit for a business. P1 Q1 Q2 Q3

Think About It… Why is economic equilibrium important? Equilibrium is the goal because it is the point of maximum profit for a business. Equilibrium is the goal because it is the point of maximum profit for a business.

Effects on the Economy If there is a shortage, this means that there is less supply from producers than there is demand from the consumer. Who has more control over the market? The buyer or the seller? If there is a surplus, this means that there is more supply from producers than there is demand from consumers. Who controls the market? Seller! Shortage – seller’s market Surplus – buyer’s market Buyer!

Impact on Industry Consider the market for hot chocolate. Describe how supply or demand would change based on each event.

What’s your favorite color M&M? Shortage, Surplus or Equilibrium Each students needs a handout and one fun size bag of M&Ms.